D.C. Circuit Narrows District Court’s Preliminary Injunction in CFPB Fight

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On Friday, April 11, the D.C. Circuit issued a per curiam order granting in part the government’s motion to stay Judge Amy Berman Jackson’s March 28 order preliminarily enjoining the CFPB’s Acting Director Russell Vought from carrying out what she determined was a plan to “disable and dismantle” the agency.

Friday’s D.C. Circuit’s ruling permits Acting Director Vought and his management team greater flexibility in determining the headcount of the agency, provided they continue to maintain staff sufficient to carry out the CFPB’s statutory duties, while the full appeal of Judge Jackson’s ruling is before the D.C. Circuit. The Court of Appeals expedited the appeal, which will be fully briefed by May 13 and argued on May 16. Until that time, the injunction — as modified by the D.C. Circuit (identified in underlining) — provides as follows:

1. Defendants shall maintain and shall not delete, destroy, remove, or impair any data or other CFPB records covered by the Federal Records Act (hereafter “agency data”) except in accordance with the procedures described in 44 U.S.C. Chapter 33. This means that Defendants shall maintain and shall not delete, destroy, remove or impair agency data from any database or information system controlled by, or stored on behalf of, the CFPB. The term “agency data” includes any data or CFPB records stored on the CFPB’s premises, on physical media, on a cloud server, or otherwise. The defendants must take all necessary steps to ensure its contractors do the same.
2. Defendants shall reinstate all probationary and term employees terminated between February 10, 2025, and [March 28, 2025], including, but not limited to, Julia Barnard, the Private Student Loan Ombudsman, but this provision is stayed insofar as it requires defendants to reinstate employees whom defendants have determined, after an individualized assessment, to be unnecessary to the performance of defendants’ statutory duties.
3. Defendants shall not terminate any CFPB employee except for cause related to the individual employee’s performance or conduct. Defendants shall not issue any notice of reduction-in-force to any CFPB employee, but this provision is stayed insofar as it prohibits defendants from terminating or issuing a notice of reduction in force to employees whom defendants have determined, after a particularized assessment, to be unnecessary to the performance of defendants’ statutory duties.
4. Defendants shall not enforce the February 10, 2025, stop-work order or require employees to take administrative leave in furtherance of that order. Defendants shall not reinstitute or seek to achieve the outcome of a work stoppage, whether through a stop-work order, an order directing employees to take administrative leave or any other means, but the D.C. Circuit interprets this provision to allow work stoppages that defendants have determined, after a particularized assessment, would not interfere with the performance of defendants’ statutory duties.
5. To ensure that employees can perform their statutorily mandated functions, the defendants must provide them with either fully-equipped office space or permission to work remotely and laptop computers enabled to connect securely to the agency server through the Citrix Virtual Desktop or another similar program.
6. Defendants shall ensure that in accordance with 12 U.S.C. §5492(b)(3), the CFPB Office of Consumer Response continues to maintain a single, toll-free telephone number, a website, and a database for the centralized collection of consumer complaints regarding consumer financial products and services and that it continues to monitor and respond to those complaints, including by providing Elevated Case Management.
7. Defendants shall rescind all notices of contract termination issued on or after February 11, 2025, and they may not reinitiate the wholesale cancellation of contracts. This provision does not prohibit the defendants from ordering that work or services under specific contracts be halted based on an individualized assessment that the contract involved is unnecessary for the agency to fulfill its statutory functions. To ensure that this Court can award full relief at the end of the case, however, the defendants may not finalize the termination of any contract.

The D.C. Circuit stayed defendants’ obligation to file a report with the district court that confirms that (1) individuals that the injunction could bind have received notice and (2) the agency’s compliance with the district court’s original preliminary injunction.

What Does this Mean for the CFPB?

According to public reports, Senator Tim Scott, the Chairman of the Senate Banking, Housing and Urban Affairs Committee, told a roomful of bankers that he expected the President’s nominee to run the CFPB, Jonathan McKernan, to be confirmed in May. He also reportedly said that the administration’s plan was to shrink the CFPB to “the right size” before McKernan took the helm.

The D.C. Circuit’s April 11 order permits Acting Director Vought and his team to make a “particularized assessment” of the number of employees the CFPB needs to carry out its statutory duties and pursue a reduction in force terminating excess headcount. Still, it presumably would not permit the wide-scale reduction in force of almost the entirety of the agency’s staff that had been planned in early February. Testimony provided during an evidentiary hearing before Judge Jackson suggested that planning for a reduction in force had continued throughout the court proceedings. Therefore, it is possible that the CFPB could announce a reduction in force soon.

Decisions regarding the agency’s headcount could significantly impact the regulated community. The CFPB has already announced that it is considering revisiting several rules issued under Director Chopra or his predecessors, including the Payday Rule, the Small Business Lending Data Collection Rule, and the Nonbank Registry Rule. Congressional allies have called on the CFPB to revisit additional rules, including rules regarding Property Assessed Clean Energy financing and Credit Card Late Fees. Such rulemakings require staff capable of drafting the proposed and final rules, including staff capable of performing the cost-benefit analysis required for any CFPB rule. An announcement regarding any reduction in force could reveal whether the Trump administration plans to make good on its deregulatory ambitions.

Such an announcement could also provide important insights into how the agency plans to exercise its supervisory and enforcement powers over the next several years. The reduction in force planned for February 14, which the NTEU litigation stopped, would have eliminated 528 positions from the Division of Supervision and 283 positions from the Division of Enforcement — the entirety of both divisions. Such deep cuts are likely not permissible, but the CFPB could determine that it can carry out its statutory functions with much smaller headcounts. That could mean far fewer investigations and examinations, especially for nonbanks that are not subject to the supervisory authority of the federal banking agencies. The regulated community, as well as state attorneys general committed to filling any void, will be paying close attention.